HL Deb 03 April 1984 vol 450 cc588-92

2.41 p.m.

Lord Underhill

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows: To ask Her Majesty's Government what progress is being made to privatise Sealink Ferries; whether a bid by a consortium led by National Freight for £100 million is under consideration; and what Sealink's pre-tax profits were last year.

Lord Lucas of Chilworth

My Lords, as my honourable friend the Parliamentary Under-Secretary of State for Transport said in another place yesterday, the British Railways Board recently announced its intention of selling the whole of its interest in Sealink UK Ltd. and of selling the company as an entity. The board's merchant bankers, Morgan Grenfell and Co. Ltd., wrote on 19th March to potential purchasers seeking expressions of interest in the company. Formal bids have not yet been requested, and so none is under consideration at present. Sealink earned a profit before interest and tax of £12.8 million for the year to 31st December 1983, compared to £2.9 million for the preceding year.

Lord Underhill

My Lords, I thank the noble Lord the Minister for that Answer. May I ask him whether he agrees that the profits he has just announced reflect considerable credit on this nationalised undertaking and the workers within it? Will he say whether it is a fact that the Secretary of State directed the British Railways Board to dispose of the Sealink ferry fleet and the harbours? Do I understand from the Minister that the ferry fleet and the harbours will be sold as one unit? Is there any reason why the British Railways Board is not retaining an interest in this profitable company?

Lord Lucas of Chilworth

My Lords, I agree with the noble Lord, Lord Underhill, with regard to his comments about the improved profitability, which does credit to those concerned with the undertaking. So far as his question with regard to the Secretary of State's direction is concerned, the noble Lord will recall that in 1980 the privatisation of some aspects of the British Railways Board's holdings was discussed and agreed with the board. It is the board itself which has decided that now is the time to dispose of those assets.

I think the noble Lord's third supplementary question was with regard to whether Sealink would be sold as a whole. It is the intention that the company will be sold as a whole, and that is what Morgan Grenfell have set out in their letter. Lastly, the noble Lord asked me whether the British Railways Board would retain any holding, and the answer is, "No".

The Earl of Halsbury

My Lords, can the noble Lord tell the House what was the £12.8 million profit to which he referred? Was it return on the capital employed in the business?

Lord Lucas of Chilworth

My Lords, I very much regret that I cannot do that—my ability at mental arithmetic is not that good—but I can certainly let the noble Earl know that. It may help him to know that in the British Railways Board's public relations press release of Monday 19th March they said that at 31st December 1983 the net assets of Sealink UK, adjusted to reflect the valuation of Sealink UK's land, buildings and fixed plant at 30th September 1983, amounted to £127.8 million, after adding to shareholders' funds an amount due to the British Railways Board on inter-company account of £48.5 million, and £26 million nominal of 9¾ per cent. unsecured loan stock of Sealink UK held by the British Railways Board.

Lord Cledwyn of Penrhos

My Lords, given that this is an efficient and profitable public undertaking, could the noble Lord say what is the Government's motivation in wishing to sell it? Secondly, is he aware that the lack of information that has been made public has caused a great deal of anxiety and concern, especially among those who are employed in British Rail ports throughout the country? Will he give a clear undertaking that, as soon as possible, the Government or British Rail will publish a document, in the form of a White Paper or some other Paper, which makes the intentions clear?

Further, when the noble Lord states that the undertaking is to be sold as one entity, would he indicate to the House precisely what this means? Are the ports to be sold? Are the installations to be sold; or are the ships only to be sold? Is it possible that at the end of the day it may be split, so that the Welsh ports, for example, of Fishguard and Holyhead will be sold separately? Is he aware that the lack of information on this subject is really a public scandal at the present time?

Lord Lucas of Chilworth

My Lords, the noble Lord the Leader of the Opposition asks a number of questions. I hope that I shall be able to deal with all of them in the order in which he asked them. The motivation for the sale of Sealink UK Limited is that we believe that Sealink will benefit from the stimulus of private sector status and access to private capital. It will then be able to engage more effectively in the business in which it is engaged. He suggested that there had been a lack of information. I cannot agree with him, in so far as there have been a number of reports and press releases from my department which have set out the intention to privatise—an ugly word but one which we all understand—Sealink UK Limited. Therefore, there is no scandal and no question that information has not been made available.

Baroness Gaitskell

There is.

Lord Lucas of Chilworth

I repeat there is no scandal attached to the information which we have given with regard to the sale of Sealink UK. The noble Lord asked me whether I would give an undertaking that the proposals for the sale should be made widely known. I can give no greater undertaking than to answer his questions this afternoon. I believe that that should be an undertaking on its own. It will be sold.

So far as the Welsh ports are concerned, we consider that Sealink UK Limited is a complete unit and there is no intention of selling parts of it. The letter that Morgan Grenfell Limited sent out on 19th March, to which I referred in my original Answer, makes it quite plain to any would-be purchaser that it is the entire company in its entirety—ships, buildings, plant, ports and any other assets which the company hold at the time of sale—that is to be disposed of.

The Earl of Lauderdale

My Lords, could my noble friend just clear up one point about this? Is it not the case that whoever buys Sealink will then be free to dispose of whatever assets seem to be surplus to its operations?

Lord Lucas of Chilworth

My Lords, within certain constraints that may be true, but it is fair to say that, since British Railways have a particular interest, in that they have connecting services and so on and they also have contractual obligations with Sealink, it would no doubt be in their best interests to ensure that a would-be purchaser would not do what my noble friend suggests. Indeed, since the Secretary of State has to give final approval, he will certainly have the national interest at heart.

Viscount St. Davids

My Lords, would the noble Lord not agree that the first effect of selling off any profitable part of a nationalised industry is to cause greater losses to that nationalised industry? Would he not agree that a secondary effect of that is to cause a greater industrial activity of the part sold off, almost invariably with larger profits? Would the noble Lord not agree that the final effect is to cause a greater industrial activity in the total affairs of this country and therefore to profit us all?

Lord Lucas of Chilworth

My Lords, since the noble Viscount's three questions are hypothetical in so far as Sealink is concerned. I regret that I am not able to help him in answering them.

Lord Underhill

My Lords, in considering the bids that may be presented, is it the intention of the Government to secure from any of those whose bids may be successful an undertaking that they will not dispose of any part of the ferry fleet and harbours once they have acquired them? Can the noble Lord explain what he means by stimulus of capital, seeing that in 1983 the profits were four-and-a-half times the profits of 1982 and that the return on assets is nearly 10 per cent. and on turnover is 5 per cent., which is most creditable compared with many other companies?

Lord Lucas of Chilworth

My Lords, price will be an important factor in the sale of Sealink, but British Rail also have in mind the continuing commercial links. Since the seven harbours which the company owns will need to be retained in order that the 24 services which are undertaken by its 37 ships are integral, it seems hardly likely that bits will be chopped out; otherwise the company would not be as viable as it now is.

I am quite sure that the noble Lord, Lord Underhill, understands exactly what we mean when we say that the company will improve under the impetus of the private sector rather than the public sector and will in itself attract private capital. The fact that it has made £12.8 million before interest and tax is creditable. We believe that it can do even better in the private sector.

Lord Harmar-Nicholls

My Lords, is my noble friend aware that if the sale is subject to all kinds of conditions as suggested in the last supplementary question, they will not get their price, and then there would be criticism about not getting the price? As regards the profit, the fact that a business is good at the moment does not mean that it could not be made better. Is my noble friend aware that when set alongside the capital value of the assets as he has explained them, the profits that he has announced this afternoon are not very good and leave considerable room for improvement?

Lord Derwent

My Lords, is it not rather unfortunate that we have had to listen to five major speeches at Question Time on one Question?

Lord Harmar-Nicholls

The noble Lord has not answered my question.

Lord Lucas of Chilworth

So far as the questions of my noble friend Lord Harmar-Nicholls are concerned, I think that the best I can do for your Lordships is to say, yes, I agree with nearly all that he has suggested. There is certainly room for improvement in almost any company. We believe that the sale will give the company a greater impetus for improvement and indeed will provide a greater impetus for its staff, as was evidenced when Associated British Ports and the National Freight Corporation were both privatised; both have moved to greater successes.

Lord Leatherland

My Lords, may I ask whether when the undertaking is sold the jobs of the employees will be safeguarded?

Lord Lucas of Chilworth

My Lords, any prospective purchaser will have to have regard to the conditions of employment of the 9,400 employees.

Lord Leatherland

My Lords, does the Minister therefore mean—

Noble Lords

Next Question!

Lord Leatherland

My Lords, I am asking the Minister whether by that answer he means that some of these people will be sacked—

Noble Lords

Next Question!

Lord Leatherland

—and noble Lords must not try to muzzle me!

Lord Lucas of Chilworth

My Lords, I can give no undertaking as to what the owner of any company might do. But certainly the present employees of Sealink have conditions of employment and contracts of employment, and it will be up to any prospective purchaser to have regard to that when he makes a bid—if he makes one.